The boss of the Financial Markets Authority says spooked company directors have nothing to fear from the tightening regulatory environment - as long as they're honest.

Addressing the New Zealand Shareholders Association conference in Auckland today, FMA chief executive Sean Hughes reflected on a year of extensive court action.

"For aspiring directors, the long roll-call of failed finance companies and images of directors being sent to prison may cause them to think again," he said.

The FMA was "looking forward with glee" to enforcing the Financial Markets Conduct Bill, currently at the select committee stage and expected to come into effect in 2013.

But Hughes said it was still important that companies were helmed by leaders who were prepared to take risks. He added good directors had no reason to fear the regulatory climate.

"Participants in this market who operate with integrity, who operate consistently in the best interest of investors, will not hear from us," he said.

That was despite the "naysayers" and commentators, who he said had tried to panic directors into believing the FMA would abuse or overuse its regulatory powers.

Hughes said he was seeking an entire culture shift within the financial markets.

The relationship between the FMA and market participants was not one of fear or of partnership, he said, but of "constructive tension" and mutual respect.

Hughes said the guilty verdicts and sentences handed down to the likes of Bridgecorp and National Finance directors had provided a series of valuable reference points as to how far director's responsibilities went.

Financial illiteracy was clearly not acceptable, and nor was relying upon the guidance or advice of others without question.

"Finger-pointing and blaming each other or others is a fatally flawed defence and it won't work," said Hughes.

John Hawkins, who was re-elected as chairman of the Shareholders' Association, said directors should be well-informed and asking probing questions of senior management.

"We do not want seat-warmers or yes-men or women sitting around the board table."

He also reminded the audience that it was not beyond their power to weed out bad directors.

"As shareholders you do have a say, and you should exercise it."

Hughes acknowledged the argument that poor regulation could have contributed to investors' losses in finance companies.

But he also said shareholders and investors could not forfeit their own personal responsibility, which was to seek advice where necessary and make informed choices.